Struggling to Implement MBO for Performance Measurement in a 60-Employee Software Company? Need Step-by-Step Guidance!

Hi,

This is the third time that I am posting this question! Can anybody please help me out with MBO? I want to implement this as a performance measurement tool in the software company in which I am currently working. There are around 60 employees.

Please provide a detailed step-by-step approach.

Thanks and regards,
Ayona

Hi,

MBO (or Management by Objectives) is a technique credited to management guru Peter Drucker to describe a method of performance management that is based on the setting of clear and measurable objectives, and the use of those objectives to evaluate and review performance. When done correctly, MBO is probably the best and fairest way to plan for and create effectively performing employees. However, of course, if the implementation is poor, the outcomes will be poor.

Here's a formal definition:

Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, timelines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

The following link would be of some help to you:

http://www.performanceassociates.co....ppraisals.html

Regards,

Manju :)

Dear Ayona,
• Management by objectives is a top down approach. Create VMV (Vision, Mission, Values) of the organization and make it to fall till departmental VMV.
• Based on the VMV set organizational goals, and make the same drop down till department level.
• From departmental level, take it further down the organization and make it individual specific. There may be 5 - 7 such goals which are now the KRA's for the employee.
• Each KRA may have a group of sub goals, fulfillment of which will mean accomplishment of the KRA.
• Based on the business priorities provide weightage to these KRA's.
• Conduct your appraisal evaluating these KRA's.
Note: Be sure that the collective accomplishment of departmental and functional goals leads to organizational goal achievement.

Hi Arundhati,

We are following a very similar kind of model in our organization with a strength of 500 employees. Please find attached some details which I could pull out for your ready reference.

Cheers,
Arundhati

Dear all,

Japanese renamed MBO as "Hoshin Kanri" after making a key change. The change is "Shift from just result focus to Process and Result Focus". Hoshin Kanri means Management By Direction OR MFO (Management for Objectives).

In Hoshin Planning or MFO, management not only identifies goals but also identifies means and processes of reaching the goal. Then both Boss and subordinates agree on Goal & means (it is called the catch ball process). The advantage of MFO is ownership of the goal.

Now decide which one you want to adopt: MBO or MFO?

Best Regards,
Ramesh

Hi Ramesh,

Excellent contribution. Could you please let me know how I would go about implementing this in my organization? Could you provide a detailed step-by-step approach?

This is a software company comprising of 60 people.

Thanks and regards,
Ayona

Hi Ayona,

Please go through the attached presentation. PDCA (Plan, Do, Check, Act) cycle is used for Hoshin Planning (MFO). Also, a tool called X matrix is used for deployment.

Hope this helps. Please let me know in case you need any clarification.

Best Regards,
Ramesh

Hi Ramesh,

Thank you very much for the excellent contribution. I just want to let you know the procedure that I have decided to follow for the implementation of MBO:

1. Interaction with the directors to understand the vision and goals of the company (annual), and the procedure that should be followed to achieve them.
2. Interaction with the departmental heads to align the company's vision with the departmental goals and the necessary procedures.
3. Deciding on the performance criteria for designing the MBO.

Please let me know if the procedure I have decided to follow is correct or not. It would be great if you could provide a detailed step-by-step approach on how to proceed with this.

Thanks and regards,
AYona

Hi Ayona,

Steps are already there in my presentation. You have to convert them into micro-level steps. MBO or MFO is a top-down approach. I hope your organization already has Mission, Vision, Strategies, and Annual objectives (It may not be in a structured form, but I hope your org has a business plan where the above points are addressed). Below are the typical steps:

(You have to start this process at least 2 months before the commencement of the new financial year)

1. Reviewing the previous year plan vs. achievements

2. Reviewing Vision and Strategic Objectives (Through brainstorming. Some companies do it off-site for a day or two)

3. Finalizing key goals for the year (3 to 4 Goals)

4. Deployment of these goals department-wise (ensure that there are no conflicts between two goals)

5. Ask Dept heads to identify means of achieving their goals

6. Both CEO & Dept head agree on all the goals, Targets, means, and time frame and sign off on the policy document (Ensure the means of achieving goals are proactive, not reactive. Also, ensure goals are SMART means - Specific, Measurable, Aggressive but achievable, Relevant, and Time-bound)

7. Finalize reporting formats (templates)

8. Schedule review meetings with proper agenda and frequency

9. Define the system (formats) for root cause analysis with corrective actions where goals are not achieved and sustenance/improvement actions where goals are achieved/exceeded.

10. Periodically (at least once a quarter) review the goals in line with the changing business environment and revise them if required.

Note:
a) You can use this process (Step no 6) to identify means of achieving your goals (Example: Six Sigma, Lean, BPR, etc...)
b) Link your performance appraisal and training needs identification to the goals.
c) You can use BSC (Balanced Scorecard) for identifying the key goals and monitoring.

If you are doing it for the first time, it is a lot of work and depending on the maturity level, it will take 2-3 years to see significant results. So don't get frustrated. Go ahead with patience.

For more information, refer to any Business Excellence books or Balanced Scorecard Book by Kaplan.

Also, you can go for some Business Excellence awards/SEI CMMI where all the above becomes requirements and make your journey easy.

Wish you all the best,

Ramesh

Hi Anoya,

Please refer to the attached presentation. For more information on BSC, you can search on this website.

Ramesh

Ramesh,

I have gone through many BSC PPTs posted on this site, but how shall I go about this in my company? It is a very small one with 60 employees - 13 in IT and the rest in ITES. Don't you think that BSC would make matters more complicated? But still, I would like to go ahead with this, so I need some help from you. We do not have any software as such.

It would be great if you could shed some light on this.

Thanks and Regards, Ayona

Ayona,

You can use BSC only to select the key goals. Later, without much complications, you can follow the steps explained by me. The number of employees does not make any difference. We can even apply this concept to ourselves (Life's BSC is Physical, Intellectual, Emotional, and Spiritual factors).

I don't have any software, and I don't think software is required for this. What you need are some Excel formats. Once again, it depends on your organizational requirements. It is very difficult to take you through the entire process through this medium. My advice is if required, take a good consultant's help.

Ramesh

Hey, I need to do an assignment on how to design an MBO system for an organization and also explain the utility values for driving performance. Can you please help me out?